Refinancing

Royal Commission and What it Means for Borrowers

If they haven’t already, most lenders are preparing a major overhaul of the way they assess, and check information provided on loan applications. This includes a “deep-dive analyses” of applicants’ income and with the introduction of sophisticated bank statement retrieval records and open banking, the lenders now have much more information around an applicant’s credit to and income to base their decision on.

As Finance Specialists we are being briefed about what is required to be asked at initial interviews, including the financial documentation required and third-party verification that needs to be made in order to complete a full assessment.

From November, lenders will be using new “comprehensive credit reporting” checks by having third-party agencies check on applicants’ credit card, home, personal, or car loan debt.

It will enable the bank to cross-reference details in an application to discover whether other debts have not been listed on loan applications, undisclosed credit limits or amounts owing that are misrepresented.

Some of the toughest scrutiny will be borne by older applicant that are getting close to retirement age and also investors with rental properties.
In addition, mortgage brokers will be required to provide “enhanced verification” about applicants’ income and rental expenses. This will include more details about changes to financial circumstances, including impending retirement.

Something that has been in place for a while now but will remain in the forefront of every lenders mind is how we verify living expenses and any other commitments for a client. More and more lenders are now relying on information captured via bank statement transactions to make these verifications.

As a Finance Specialist, we are required to look out for any signs of financial hardship, including late payments, overdrawn accounts, gambling and pay day lender transactions. Any evidence of any of these can put the applicant into a higher risk category of lending that in some cases will result in a decline.

It is now more important than ever to understand how things will affect your credit rating and what is showing on your credit file. Your banking conduct is now just as important as your credit file, so keeping an eye on your account to ensure that you do not overdraw on your savings accounts and forget to pay the credit card bill could help you get a better loan deal next time you require funding for your next big-ticket purchase.

The good news is that if you get these few things right then it’s all smooth sailing for you. If you would like to get a better understanding of your position right now, feel free to call Warren on 0419 781428 or Tony on 0439 978554.

Alternatively, you can contact us here and we’ll contact you at a time that is convenient for you.

My lender is charging me a higher home loan rate than I see advertised elsewhere. Can I change lenders?

This is exactly the reason why most people change lenders. There may be a penalty clause in your current home loan, meaning you may need to pay a discharge fee, but it could still be in your financial interests to change. When shopping around it is always important to look for the comparison rate of a product. A comparison rate is essentially the true rate, taking into account the fees and charges you will pay on the loan. So even though you see a lower rate it doesn’t mean the repayments are less. AFG brokers are able to take the hassle out of this for you.

I have just come off a ‘honeymoon’ interest rate to a much higher rate. Can I move lenders or am I locked into my mortgage?

You can walk away from most mortgages, although penalty fees sometimes apply. To review your options, why not contact an AFG broker?

If I move my mortgage to a new lender, is there anything stopping that lender from increasing their rates in a few months time?

It depends what kind of product you have. If you’re concerned about rising rates, perhaps you should consider a fixed rate home loan, where repayments are fixed for a period from 1 to 5 years.

Why do some lenders charge more than others for lending the same amount of money?

Banks and other lenders pay different amounts for the money they on-lend to you, they have different overhead structures and different profit expectations. All these factors affect how much they charge to lend people money.

What documentation do I need to refinance?

The last 3 – 6 months of mortgage statements is sufficient to begin this process. An AFG broker can advise on other documentation.